Challenges facing US home builders statistics & facts

The biggest challenges facing US home builders

US home builders are going through a difficult period. The NAHB/Wells Fargo Housing Market Index, the standard measure of builder confidence, fell to 32 in September 2026, far below the level of 50 that separates good from poor conditions and its lowest reading in a year. In the latest survey of top problems by the National Association of Home Builders (NAHB), 84 percent of builders said high interest rates were a significant problem in 2025, and 81 percent said buyers were holding back because they expected prices or rates to fall. Our overview of residential construction in the United States shows what this means for the market.

The problems go beyond interest rates. Builders also struggle with the cost and availability of land, a shortage of skilled workers, rising material prices driven partly by tariffs, impact fees and regulation. To keep homes moving, 38 percent of builders cut prices in September 2026 and 66 percent offered sales incentives. This report sets out the data behind each of these challenges.

What builders say are their biggest problems

Every January, NAHB asks builders which problems they faced in the past year. In the survey published in February 2026, the most widely cited problem in 2025 was high interest rates, named by 84 percent of builders. Almost as many, 81 percent, said buyers were delaying purchases because they expected prices or interest rates to fall. Concerns about the economy and jobs were cited by 65 percent, the cost or availability of developed lots by 63 percent, and negative media reports making buyers cautious by 62 percent.

Interest rates top the list: 84 percent of builders said high interest rates were a significant problem in 2025.

Cost pressures follow closely behind. 61 percent of builders said the cost or availability of labor was a significant problem, 59 percent named inflation, 57 percent impact fees and other fees, and 54 percent environmental regulations. Uncertainty about policy in Washington was cited by 58 percent, a reflection of shifting trade and immigration policy during the year.

Builders are a little more optimistic about 2026. The share expecting high interest rates to be a significant problem in 2026 fell to 65 percent, and the share expecting inflation to be a problem to 46 percent. Even so, interest rates remain the most widely expected problem, and the survey was taken before mortgage rates and costs rose again in the summer of 2026.

Hopes of relief: the share of builders expecting high interest rates to be a problem fell from 84 percent in 2025 to 65 percent for 2026.

Home builder confidence in 2026

The NAHB/Wells Fargo Housing Market Index measures how builders rate current sales, expected sales over the next six months and the traffic of prospective buyers. A reading above 50 means more builders see conditions as good than poor. The index stayed below 50 in every month of 2025, ending the year at 39, down from 46 in December 2024. In 2026, it fell further, to 35 in August and 32 in September, the lowest since September 2025.

Sliding confidence: the builder sentiment index fell from 46 in December 2024 to 32 in September 2026.

All three parts of the index were weak in September 2026. Builders rated current sales conditions at 35, sales expectations for the next six months at 37 and the traffic of prospective buyers at just 23, the lowest of the three. NAHB said the decline reflected higher interest rates and rising costs. Low buyer traffic is a particular concern, because it suggests that many households are not even looking at new homes.

Buyer traffic weakest: the buyer traffic component stood at 23 in September 2026, compared with 35 for current sales.

Conditions vary by region. On a three-month average, builder sentiment was highest in the Midwest at 44 and the Northeast at 39, and lowest in the South at 31 and the West at 28. The South and West, where most new homes are built, have the largest inventories of unsold new homes and the strongest competition between builders, which explains the weaker readings there.

West weakest: builder sentiment averaged 28 in the West and 31 in the South, compared with 44 in the Midwest.

Price cuts and incentives

To keep selling, builders are cutting prices and offering incentives. In September 2026, 38 percent of builders reported cutting prices, up from 35 percent in August, with an average price reduction of 6 percent. The share had been 31 percent in December 2024 and 40 percent in December 2025. 66 percent of builders used some form of sales incentive in September 2026, such as mortgage rate buydowns, paying closing costs or free upgrades, compared with 67 percent at the end of 2025.

Four in ten cutting prices: 38 percent of builders reduced prices in September 2026, up from 31 percent in December 2024.

Large public builders rely heavily on incentives. Lennar said incentives and price adjustments were about 12 percent of the sales price in its quarter to August 2026, and PulteGroup reported incentives of 10.4 percent of the gross sales price in the second quarter of 2026. These incentives keep sales going but reduce margins, as covered in our report on US homebuilders. With 483,000 new homes for sale in August 2026, equal to 8.5 months of supply, builders have little choice.

Land, labor and materials

Builders face rising costs on every front. Land is the first hurdle: in September 2026, 42 percent of builders rated the availability of lots as poor, and in January 2026, 62 percent said lot availability was a significant challenge, according to the JCHS. Lot values rose 52 percent between 2020 and 2024. Labor is the second: 61 percent of builders named the cost or availability of labor as a significant problem in 2025, and average hourly earnings in construction rose 4.2 percent in the year to August 2026.

Materials are the third. Prices of inputs to residential construction rose 7.8 percent in the year to August 2026, with softwood lumber up 13.0 percent, according to NAHB analysis of Bureau of Labor Statistics data. Tariffs have added to the pressure: duties on Canadian lumber rose to 35 percent, plus a 10 percent Section 232 tariff, and steel and aluminum face tariffs of 50 percent. Builders estimated in 2025 that tariffs added about 10,900 dollars to the cost of a typical home. The full cost breakdown is in our report on the cost to build a house, and trade policy in our data on US tariffs.

What the challenges mean for the market

These challenges are already visible in construction data. Single-family construction spending was 3.5 percent lower in August 2026 than a year earlier, and housing completions fell 27.1 percent. At the same time, the number of homes authorized by permits but not yet started rose 12.9 percent to 280,000, a sign that builders and developers are delaying projects. Trends in starts and completions are covered in our report on US housing starts and completions, and permits in our report on US building permits.

For the country as a whole, the difficulties facing builders make it harder to close the gap between housing supply and demand. Every home that is not built because land is too expensive, financing too costly or regulation too slow adds to the US housing shortage. Policy changes that lower costs, such as faster approvals, lower fees and fewer restrictions on smaller homes, would help builders deliver more homes at prices buyers can afford.

Outlook for builders

The near-term outlook depends mostly on interest rates. A sustained fall in mortgage rates would bring buyers back quickly and allow builders to reduce incentives. Without it, builders are likely to keep cutting prices, building smaller single-family homes and slowing new projects. Costs are unlikely to ease while tariffs on key materials remain in place and the shortage of skilled workers persists. The next reading of the Housing Market Index, for October 2026, will show whether builder confidence has stabilized.

Builder challenges in numbers

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